AP Eagers set to bag bargain in AHG takeover

Automotive Holdings Group board backs improved takeover offer

The West Australian

Video08 May 2019 - Automotive Holdings Group (ASX:AHG) are pleased to announce that AP Eagers has today agreed to vary its all-scrip offer to acquire the ordinary shares in AHG it does not already own by increasing the consideration offered from 1 AP E.

AP Eagers stands to pick up Automotive Holdings Group for well short of its estimated value after the target’s independent expert assessed its takeover bid as “not fair but reasonable”.

KPMG has valued AHG, Australia’s biggest car dealer, at between $2.64 and $3.01 a share, well below the $2.39 to $2.47 a share value implied by the revised AP Eagers offer accepted by the AHG board last week.

KPMG’s report has been sent out to AHG shareholders along with the retailer’s target statement.

The audit and advisory firm noted that a bid can still be assessed as reasonable, even though it was not fair in regards to a valuation.

KPMG said while AP Eagers’ takeover premium “is lower than usually observed in successful takeover transactions”, there seemed little prospect of a rival bid and AHG shareholders would likely benefit from the stronger combined group.

“Accordingly, in our opinion, the improved offer is, on balance, reasonable,” it said.

AP Eagers already had a strong foothold in AHG when it launched its offer in March and has since increased its implied stake to 54 per cent with the support of major AHG shareholders.

Under the sweetened bid unanimously endorsed by the AHG board, Brisbane-based AP Eagers is offering one of its shares for every 3.6 shares in AHG.

Today’s target statement also reveals that AHG will pay up to $2.9 million to lock in its senior executives for 12 months under new retention agreements linked to the bid.

The agreements are aimed at ensuring management continuity as the offer, which remains subject to regulatory approval, runs its course.

The executives will also share $450,000 “in recognition of the increased workload” linked to the AP Eagers bid.

AP Eagers shares were off 20¢ at $8.51 as at 9.50am, while AHG was 3¢ down at $2.30.